MS&AD Holdings Conference Call (November 18, 2016) FY2016 2Q - PDF document

MS&AD Holdings Conference Call (November 18, 2016) FY2016 2Q Briefing Q&A Summary Below is a summary of the Q&A session from the IR conference call held on November 18, 2016. The following abbreviations of company names are used in this document. MS&AD Holdings : MS&AD Insurance Group Holdings, Inc. MSI : Mitsui Sumitomo Insurance Co., Ltd. ADI : Aioi Nissay Dowa Insurance Co., Ltd. MSI Aioi Life : Mitsui Sumitomo Aioi Life Insurance Co., Ltd. MSI Primary Life : Mitsui Sumitomo Primary Life Insurance Co., Ltd. (FY2016 2Q Results) Q1: Please tell us what caused a worsening of the combined ratio for domestic non-life insurance in the FY2016 2Q year-on-year in page 5, on the basis of both including and excluding natural catastrophes. Please also tell us about why MSI’s performance was worse than that of ADI’s. A1: The combined ratio shown here is on a written paid basis. The main cause in the worsening was a substantial reduction in net premiums written for fire insurance. (FY2016 Forecast: Net income) Q2: The forecast for net income for FY2016 for the full year is expected to remain on the whole as predicted because the negative effects of a stronger yen will be offset by positive effect of improvement in underwriting results for domestic non-life insurance companies. Market conditions are expected to change in the second half where we now face a weaker yen, high stock prices, high interest rates, and an increase in interest rate in Australian dollars. Please tell us if we should view your revised forecast to be quite conservative if the current market conditions will continue. A2: We use the average rate for the period for income and expenditure in overseas subsidiaries. Therefore, the exchange rate in recent days will not substantially improve the results of current fiscal year. While the effects of a weaker yen against the Australian dollar and higher interest rate will be positive elements for MSI Primary Life, the current level is within the range of reversals of price fluctuation reserves. It will change if there is further weakening of the yen or a higher interest rate however, it is not a major positive element at present. SQ (follow up) : May I understand that the current exchange rate situations will not substantially affect performance of this fiscal year because the MS&AD Holdings uses the average exchange rate, but will improve performance in the next fiscal year. 1

SA: Yes, your understanding is right. (FY2016 Forecast: Ordinary profit) Q3: It appears that there is no change in the forecast for ordinary profit on the whole for the full FY2016. Could you please tell us if there are any changes to the forecast for each business including consolidation adjustments, etc.? A3: The following revisions will be made for each business and company compared to the initial forecast: Domestic non-life business: MSI: +9.0 billion yen, ADI: +2.0 billion yen, total for 2 companies: +11.0 billion yen Domestic life insurance business: MSI Aioi Life: -2.0 billion yen, MSI Primary Life: -6.1 billion yen, total for 2 companies: -8.1 billion yen Overseas subsidiaries: -9.5 billion yen Consolidation adjustments etc.: +6.5 billion yen (FY2016 Forecast: EI loss ratio of domestic non-life) Q4: MSI's EI loss ratio for FY2016 2Q has improved by 2.8 points year-on-year. Please tell us what you are expecting for the full year. A4: We are expecting the EI loss ratio for MSI excluding natural catastrophes to be 54.8% for the full year. We are expecting an improvement by 1.2 points compared to the initial forecast. (FY2016 Forecast: Underwriting profit for domestic non-life) Q5: The underwriting profit forecast for the full FY2016 for MSI has been revised upwards by around 8.0 billion yen compared to the initial forecast, excluding the impact of foreign exchange rates and catastrophe loss reserves. If you ignore the catastrophe loss reserves and the exchange rate fluctuations, it looks as if the underwriting profit forecast for the second half is around 46.0 billion yen. Please tell us the reason for your forecast of a more robust result than the 30.0 billion yen recorded in the previous year, during which there were fewer snow-related losses. A5: The factor for each item is as follows: Earned premium: +7.0 billion yen (positive element) Incurred losses: +10.0 billion yen (negative element) Net expenses: +5.5 billion yen (negative element) Other profit/loss: Approximately +10.0 billion yen (positive element) The main cause in other profit/loss is a decrease in the policy reserve burden for marine insurance where there were substantial losses in the first half. As a result, we are expecting a +4.0 billion yen increase in profit year-on-year before catastrophe 2

loss reserves. SQ (follow up): Not only were there fewer snow-related losses in urban areas last year, but I believe there were also fewer winter snow-related losses in northern Japan, as there was less snowfall there. I believe the increase in incurred losses of around +10.0 billion yen is rather small. Please explain the factors involved here. SA: During the second half last year, there were many large loss incidents in fire insurance, among others, and this year we are expecting these to be around the same level as usual. In other words, we are not expecting them to be as much as last year. We are currently expecting incurred losses to be around the same as forecast. (FY2016 Forecast: Net income for domestic non-life) Q6: The analysis of Group consolidated net income forecast for the full FY2016 shows that the incurred losses will improve by 40.0 billion yen compared to the initial forecast. Please give us a breakdown of the positive factors. A6: The impact of exchange rate is 23.8 billion yen. The remaining 16.2 billion yen is mainly due to improvement in the loss ratio. We carried out a review by referring to interim status of mainly voluntary automobile and fire insurances. Q7: Please tell us why you are forecasting a reduction in incurred losses despite expecting an increase in domestic natural catastrophes to 63.6 billion yen, compared to 62.5 billion yen in your initial forecast, as part of your assumptions for the full-year performance forecast for FY2016. Please also tell us about the possibility of deferral of claim payments to the next fiscal year. A7: The forecast increase in domestic natural catastrophes is slight, and is almost the same as the initial forecast. We have reduced incurred losses other than domestic natural catastrophes, mainly due to expected improvement effects in the loss ratio for voluntary automobile and fire insurance. We foresee a reduction in incurred losses will lead to a reduction in claim payments, and the reversal of catastrophe reserves will decrease accordingly. (FY2016 Forecast: Net income for overseas subsidiaries) Q8: You are expecting net income for overseas subsidiaries to be 44.0 billion yen in your full FY2016 forecast. Please tell us the breakdown including comparison with the initial forecast. A8: The breakdown of 44.0 billion yen (comparison with initial forecast) is as follows. We expect a 3